Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/200088
Authors: 
Bhagwat, Pradyumna C.
Marcheselli, Anna
Richstein, Jörn C.
Chappin, Emile J. L.
Vries, Laurens J. De
Year of Publication: 
2017
Citation: 
[Journal:] Energy Policy [Volume:] 111 [Pages:] 255-267 [Pages:] 0301-4215
Abstract: 
We analyze the effectiveness of a forward capacity market (FCM) with long-term contracts in an electricity market in the presence of a growing share of renewable energy. An agent-based model is used for this analysis. Capacity markets can compensate for the deteriorating incentive to invest in controllable power plants when the share of variable renewable energy sources grows, but may create volatile prices themselves. Capacity markets with long-term contracts have been developed, e.g. in the UK, to stabilize capacity prices. In our analysis, a FCM is effective in providing the required adequacy level and leads to lower cost to consumers and more stable capacity prices, as compared to a yearly capacity market. In case of a demand shock, a FCM may develop an investment cycle, but it still maintains security of supply. Its main effect on the power plant portfolio is more investment in peak plant.
Subjects: 
Adequacy policy
Agent-based modeling
Capacity markets
Capacity mechanisms
Electricity market
Security of supply
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by/4.0
Document Type: 
Article
Document Version: 
Published Version
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